With the recent change of leadership in Washington, DC, people have been asking me whether I am still as bullish on impact investing as I have been over the past few years. Simply put, my answer is yes—perhaps even more so today. Although it is still early days for impact investing, its momentum is strong and gaining. As part of this momentum, a few trends have emerged that hold the potential to broaden and deepen the movement, and they are grounding the work we at the Case Foundation are doing alongside a growing alliance of partners in the space.
Trend 1: Women and millennials are a driving force.
In the coming decades, women and millennials, many of whom are motivated by a world view that profit and purpose are inextricably linked, are poised to inherit large sums of money and gain control over family wealth. Research suggests that up to $30-$40 trillion in wealth transfer will take place over the next 30-40 years. Talk to high-net-worth advisors today, and they will tell you this trend is already underway, as surviving spouses and next-generation family members are looking to deploy early capital in a way that aligns their investments more closely with their values. In addition, these two segments will continue to represent a growing share of the US workforce across income levels, with significant combined capital to deploy even before the wealth transfer takes place.
In a 2014 Campden FB report, Wealth Legacy Managing Partner Emily Bouchard writes, “Many women want to have their investments not only make them excellent returns, but to also have a positive impact on the world—and many alternative investments allow them that opportunity.” Women’s flexibility in evaluating different investment opportunities, working across the risk-return spectrum, and bringing different types of capital to bear makes them increasingly versatile investors.
In 2016, US Trust's annual Wealth & Worth Survey revealed that impact investing by millennials has increased considerably; 28 percent of millennials surveyed had impact investments, up from 17 percent the previous year. "For millennials, impact investing is really a part of their identity," said Jackie VanderBrug, senior vice president at US Trust. "Millennials are conscious consumers, so it is logical that they are also conscious investors."
The Case Foundation is actively engaging these two market segments and aims to:
- Inspire them by publishing relevant case studies
- Educate them via dedicated convenings, targeted outreach at conferences, and social and traditional media
Trend 2: A data-driven ecosystem is burgeoning.
The lack of transparent data and information in the impact investing field has consistently been a barrier to scalable growth. For impact investing to move from niche to mainstream, it needs a fully formed, robust ecosystem driven by transparent data. Today impact investing opportunities exist across asset classes, and investors diversify risk and manage their portfolio by allocating their assets across these distinct classes. In the earliest days of impact investing, gaps across all classes—as well as a lack of specialized expertise and data, and limited deal flow—hampered growth. But in recent years, the impact investing ecosystem has been filling out on both the supply and demand sides, with a growing number of investor tools, data, and services. Yet, too often all parts of the impact investing landscape are not visible to both investors and those seeking investment.
To turn this challenge into an opportunity, the Case Foundation has developed an Impact Investing Network Map, a relationship-mapping tool that demonstrates the connections across the impact investing landscape. This easy-to-use visualization tool intends to "map" the impact investing ecosystem, and provide current and potential investors with a snapshot of what the market represents. It is searchable by geography, asset classes, and impact focus areas. We see this as an important on-ramp for investors and advisors seeking to understand where they can join in.
In addition, we are heartened by research based on available data that demonstrates strong performance in early impact investments. The Impact Investing Benchmark Report from Cambridge Associates and the Global Impact Investing Network (GIIN) is just one example of how research around strong impact investing performance supports our evolving understanding of the space. Similarly, according to a University of Pennsylvania Wharton School report, impact funds can achieve results comparable to market indices.
We will support expansive efforts to build confidence, and better inform and equip investors by:
- Spotlighting the growing body of research on impact investing activities and data, in particular, by releasing the Impact Investing Network Map this year
- Encouraging and funding new research
Trend 3: Large-scale investors are starting to increase engagement, but more is needed
Despite increasing participation in the sector, total capital deployed to impact investing represents a small fraction of the global economy. Just like the growth of venture capital, this movement won't become mainstream until some of the largest investor segments jump in. While we’ve seen some activity already, it may take time for pension funds, academia, and foundations to become fully activated. But it is encouraging to see investment committees across institutions revisiting their investment policies, with an eye toward bringing portions of their portfolios in closer alignment with their mission and values. To further support this momentum, we will:
- Create and highlight case studies of efforts to transition some or all portfolio activity to impact investing
- Facilitate and promote a broader conversation on expanded products and offerings that emerge at appropriate scale for different classes of investors
With significant trends pointing to a positive future—including the growing influence of women and millennials, increased data and measurement transparency, the development of a more robust ecosystem, and signs that some larger institutions are embracing changes that could bring them off the sidelines—our outlook on impact investing’s future is bright. We continue to look forward to the time when the idea of aligning investing with values is in the mainstream.
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